Aggregate Demand Flashcards
1
Q
What are the main components of AD?
A
AD = C + I + G +X - M
2
Q
Why does the AD curve slope downwards?
A
The real balance effect
The trade effect
3
Q
Factors that affect consumption
A
Income Income tax Interest rates Wealth effect Consumer confidence Demographic trends
4
Q
Factors that affect investment
A
Business confidence
Company profitability
Taxes
Interest rates
5
Q
Factors that affect government exports
A
Changes in government policy
Increase in government expenditure
6
Q
Factor that affect net exports
A
Fall in exchange rate - increase in AD
Rise in exchange rates - decrease in AD
Domestic recession - rise in X - M
Foreign recession - fall in X - M
